The courier, express, and postal industry is the largest segment of the transportation marketplace worldwide. This blog will provide a personal perspective on the challenges faced by firms in the industry as they serve an increasingly competitive market.

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Thank you for the opportunity to respond to the OPM Inspector General’s study reviewing our recent reports about the mischarges and overfunding of the Postal Service’s benefit obligations. Both the postal pension and health funds are administered by OPM and are accounted for separately from the federal government’s benefit funds.
Our reports focused on the latest of OPM’s long history of miscalculations involving Postal Service benefit funds:

In 2002, the Postal Service’s pension fund was found to be overfunded by $78 billion. Congress corrected this in 2003.

In 2003, OPM attempted to make the Postal Service responsible for $27 billion in military service pension obligations for Postal Service employees. Congress refused to accept this attempt.

In 2009, we found that the OPM used an exaggerated 7 percent health care inflation forecast instead of the 5 percent industry standard, resulting in an overpayment of $13.2 billion by 2016. Congress ordered OPM to review it and they changed it.

The Postal Service has been overcharged $75 billion for its share of the CSRS pension payments. In essence, for 40 years the Postal Service paid its own and the federal government’s inflationary costs.

OPM typically responded to these findings with initial denial followed by major corrections. In such a history of errors, one would expect to see some balance.

Errors are normally random, but without exception these have disadvantaged the Postal Service.

Self discovery by OPM of such substantial miscalculations should have occurred.

Self correction by OPM, charged with fund administration, would also have been expected.

Regarding the matter that was reviewed in the OPM report, the Postal Service Office of Inspector General has the following observations:

Our reports concerning the mischarges and overfunding of Postal Service benefits relied on the work of an actuarial firm that was under contract to the OIG. That firm had previously done work for OPM in the benefits fund area. Our work was independently reviewed by a second actuary employed by the Postal Regulatory Commission (PRC). In contrast the OPM characterizes their study as an analysis based on the work of others, but without independent actuarial assistance.

The OPM study makes the following points in their review:

The taxpayers will sustain losses if the funds are restored to the Postal Service.

The Postal Service would use the returned funds to subsidize operations and not for benefit funds.

OPM is unable to correct the overcharges because of their limited authority.

In response to the OPM, we have some observations on each of their points:

The Postal Service benefit funds are funded entirely by postal employees and postage from American citizens and businesses. Postal Service contributions should not supplement federal employee contributions and federal employee contributions should not supplement Postal Service contributions.

If benefit fund overpayments were returned, the money would not be used for Postal Service operations. The proposal is to use the surplus to make annual benefit payments. Using employee money for postal operations would be as wrong as putting it in the federal employee benefit fund; both are improper.

The Postal Inspector General and Senator Collins believe that OPM could correct this funding issue using their own authority. OPM has responsibility for accurately and fairly administering these funds.

OPM recommended 100 percent funding levels for both the Postal Service’s retirement and healthcare funds. However, the report is silent on the adequacy of OPM’s government prefunding level of 40 percent for retirement and 0 percent for healthcare.

This is not about the financial condition of the Postal Service, but that the Postal Service was overcharged and subsequently overpaid into benefit funds. In the Unites States there is the rule of law and the accounts must be settled. This issue is fundamentally about righting an inequity.

11 comments:

Quite an excellent response from the OIG! All the facts, well and concisely presented. If only The Washington Post, The NY Times, or even Chris Matthews or Rachel Maddow would pick up this "postal missive" and run with it....For once, OPM, just do the right thing.

OPM appears to be playing a game of political chicken. Their initial report is at the least disingenuous since it casts the Postal Service in the light of a stock company on the verge of bankruptcy.That's a strained analogy and doesn't begin to address the inequities of their actuarial assumptions. These problems are not new and they should not be used to bludgeon the Postal Service, its employees or its rate payers. Virtually no enterprise in the United States pre-funds 100% of retiree pensions and health benefits.The Postal Service absolutely needs to consider a business and service model that is appropriate for the changing mailing environment but it shouldn't have to do so with one hand tied behind its back. It should start with a fair and accurate accounting of its future obligations. OPM would cynically have us believe that its position arises purely out of concern for the viability of the Postal Service when it appears its greater concern is covering its own behind.

Now that's a smackdown! The USPS-OIG did a succinct but thorough job of refuting the disingenuous and self-serving propaganda the OPM-OIG has been putting out there. Will it matter? Probably not, since this dispute is political, not factual. But if the dispute could be adjudicated in a legal venue rather than Congress, the USPS-OIG would win in a walkover.

So... the postal Service is still a cash cow for congress and OPM. I am sick of the double-talk and the hide-and go seek. That 75 billion was spent long ago. This is why there is so much song and dance.

My first question: How much interest is owed to USPS by the Treasury on the $75 or whatever billion dollars of overpayments to the fund? My next question: What is the unfunded pension and benefit liability of the Treasury for retired members of Congress? But of course the new Republican majority can't afford to pull $75 or so billion from the Treasury - we're broke!

A house divided can not stand. The USPS-OIG wrote an excellent response and the only thing left for OPM to do is return the $75 billion and with interest. Or to put it more plainly, where is the money?

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Blog Author

Alan Robinson is the President of the Direct Communications Group and an associate of Analytic Business Services (AnaBus). He has over twenty years experience helping firms and government officials deal with the regulatory, policy, marketing, and management issues associated with changes in competition within transportation, parcel delivery and postal markets.
He can be reached at alan.robinson@directcomgroup.com